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I know this sounds stupid, but all the crypto currencies do really, really well after an initial Coin Offering (ICO), with some coins going up 10000% in 6 months.

I find it puzzling: shouldn't people be racing to buy every new coin, ever?

Even if you just spend 500 bucks, a 15x increase is still a lot of pocket money.

But in reality, that's not the case—most people stay pretty much indifferent and dispassionate about ICOs.

Why do investors seem indifferent about crypto-currencies and ICO's?

Are those ICOs private? Fixed?

schizoid04
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Matt Cox
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5 Answers5

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My big gripe with the ICO name and corresponding mania is that it has no similarity to an IPO. At best an ICO is a seed stage investment in a wholly unproven technology/idea/theoretical use.

A developer team gets together to write a fancy whitepaper, then build out a nifty website to display the idea they are working on. Generally this idea has no practical immediate use. Generally this idea is still nothing more than an idea. At best the idea will be realized by substantially reusing the open source codebase of a different coin with slight tweaks. The developers then go get an exchange or two involved to begin trading the tokens. One exchange even goes so far as to begin trading IOUs for the tokens before the ICO takes place. It's shear insanity driven by this mania to have the next bitcoin for $0.00001 each.

When a real organization goes through the real, regulated, IPO process it has already had its seed funding then subsequent equity financing rounds, THEN once the company has demonstrated that it has a valuable product or service and a competent management team shares are allowed to be sold to the public. By US law, seed stage companies are forbidden from seeking investment from unaccredited investors (this doesn't mean unaccredited investors are forbidden from investing). An accredited investor is someone with over $200,000 per year of income or a net worth of over $1,000,000.

Seed stage organizations have an exceptionally high rate of failure, no matter the proposed business.

These ICOs are little more than developers fleecing naive "investors" by selling them the pipe dream of being on the ground floor of the next bitcoin. It's really appalling. You should stay away from them, everyone should stay away from them, and the people running them should be punished.

stannius
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quid
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There is no sure thing in investing. Everything has a risk component. Sure, people talk about these cryptocurrencies like they have nowhere to go but up, but there are massive risks with these. For example, they could be declared illegal, the exchanges could go bankrupt (and some have), the backing companies off the ICOs could fail, the algorithms behind them could have a fatal flaw with unknown consequences, they can be stolen in unusual ways, everyone could suddenly realize that they have no real value...

Glen Pierce
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Given your premise is correct:

How do you cash in a large sum of YetAnotherCryptoCoin shortly after it´s ICO?

The crypto-exchanges take some time to add a new currency, if they do at all. And even if they already have, trading volume is usually low.

I think that´s what really makes it unattractive for Investors as opposed to tec-enthusiasts (aside from the high volatility). Total lack of any reliable trading capability.

Daniel
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Not guaranteed by a long way, some will realise a positive return but a lot will be lucky to break even. Remember a lot of these companies sell a lot during the pre-sale which is usually before the public ICO.

Teh
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A sure-fire way to make money? Hell no.

There are tonnes of scams and money grabs out there, not to mention the fact that most ICOs are based on projects that are going nowhere.

Having said that, there are many ICOs each month that will do very well in the future. The best thing to do is to shortlist a number of projects you like the sound of and then sit down and research each of them. Some of the key things to look out for, aside from whether you think the idea is a good one are:

  • The team. Do they have a proven track record? Are they reputable? Is what they claim provable? Google team member names and check to see if they have a legit Linkedin profile.

    The Whitepaper. Is it clearly worded without spelling and grammar mistakes? Does it have a well defined roadmap with provable achievements to-date?

    The ICO format. How much are they looking to raise and is it a realistic figure? Are unsold tokens burnt? Is there a maximum contribution limit per investor?

    What does the competition look like? If they are first to market then this will make the startup way more attractive.

The above are probably the most important things to consider though there are many other things to investigate.

I have written a fairly comprehensive guide to all the things I look out for when analyzing the investability of an ICO. You might want to check it out before firing out your Bitcoin and ETH into dubious projects.

ICOExaminer.com
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